NGOs might focus on activities in areas involving health or health emergencies, education, infrastructure, advocacy of minority rights, support of the poor, and the reduction of crime. Learn more from these guidelines that will help you comply with all tax requirements in Ghana. There are two interpretations to this finding. In the case of Attorney of Hong-Kong v Reid, [1993] the court said a principal ought to have the right to trace and to follow a bribe or secret commission It can therefore be construed that, however an income is earned, once it is taxable, the Ghana Revenue Authority can tax same. Yes, But the salaries which NGOs pay are much lower than the corporate work. The normal response will be Of course!. After 14 years following the passage of the Income Tax Ordinance, then came the Income Tax Decree, 1975, S.M.C.D 5. Although ministries, departments and agencies are required to submit a list of all contracts awarded to consultants to the Internal Revenue Service, it is believed that compliance is low. Consumer and industrial products and services. Policymakers regularly review and propose . The implication of the above definition was that, for any religious organisation to qualify for exemption, it should not only be described on paper as such, it must also act pari passu. Flowing from the foregoing, it is imperative that there should be a paradigm shift in our deliberation on the position of the law with regards to taxation of religious organisations. [Emphasis mine] Exempt organisation was defined in Section 94 to mean a person. The Bible says in Luke 11:28, , blessed are those hearing the word of God and keeping it. Where such is the case, it is quite worrisome, and it requires immediate action. WHAT HAPPENS TO THE PROFIT EARNED BY THE NGO? My understanding of Jesus statement Render unto Caesar that which is Caesar's" is that it unambiguously commands people to respect state authority and to pay the taxes it demands of them. A religious organisation that seeks the approval of the CG for tax exemption must have a written constitution with express provisions that prohibit it from: i.engaging in a political party activity, supporting a political party or using its platform to engage in party politics; ii. Gifts derived in course of employment, business and investment; Now, where a religious leader acquires property or makes investment in his own name, the question that must be asked is; what is the source of income of the person? Some paid up, some negotiated to settle years of overdue taxes to avoid the dishonour of business closure. It is so with the collection of consumption (the value added) tax. Calculating taxes can be tedious, even more so if you are not sure about the rates and percentages. Profits earned by NGOs can be channelized in the most effective way if so is desired for. However the DTC proposes for the utilization of the 15% of the surplus or 10% of the receipts within three years in order to restrain the accumulation for a longer period and in such case where the surplus is not utilized it shall become taxable at a rate of 15%. What concerns us now is the degree of compliance. Average salary in Ghana is 306,223 GHS per year. Treatment of an Honorarium as Employment Income. Condition of Use Construction and renovation of church premises. The views expressed do not necessarily represent those of PwC. The commitment to paying taxes is low. My contribution is directed towards the Commissioner-General (CG) and his officials, the Government of Ghana, Tax Professionals and Students, and the Academia in our attempt to educate the religious fraternity, and the general public, in particular, the ordinary man in madina trotro. Purchase of anniversary T-Shirts and Clothes; US$1,000, c. Rental of the premises of a near-by School which has bigger space for reception after the programme; US$2,000, d. Catering - caterer to provide food and drinks for the programme; US$1,000; and. An honorarium is considered employment income for income tax purposes and is therefore subject to deductions. NGOs are required to charge VAT on all taxable goods and services supplied and remit same to the FIRS as at when due. vii. The most typical earning is 85,745 GHS. Advertisement. The church is required to withhold tax of US$250 on payments to the supplier and pay same to the Ghana Revenue Authority. conferring a private benefit, other than in pursuit of a function of the entity as a religious institution. Any excess revenue (surplus) remaining after all the expenditures of a religious organisation in any year has to be retained and applied in the future to the companys purposes. Africa Health Research Organization Ghana is situated in Accra, Ghana. Most NGOs are not within the tax net of the central government (if at all they pay tax it may on some commodities) and in fact governments all over the world offer assistance in whichever way they can. Companies limited by guarantee including NGOs are exempted from paying corporate taxes. The girls are placed in top corporations where they get work experience in their related areas during the summer breaks. This is the background to the general expectation that NGOs should not be subject to taxation. Country Director of Action Aid, John Nkaw, has dismissed the perception that people create non-governmental organisations (NGOs) to make money. The activities of IOM Ghana focus mainly on assisted migration and development, migration health services, voluntary return and reintegration, cultural orientation, counter-trafficking, emergency assistance, and resettlement. BENEFITS AVAILABLE TO THE NGO & CONTRIBUTORS: An NGO by getting itself registered u/s. Such tax cheating can be overcome (not eliminated) through sting operations and random audits. Well, simply put it is because the assumption of an automatic tax free environment for NGOs is mistaken. Do non-profit/ non-governmental organisations (NGOs) deserve a special tax regime? Failure to withhold taxes is an infringement of the law which exposes the organisation to penalties and interest surcharges. Of government employees, withholding taxes covered about 68% of those who worked in the utilities. With the above set of facts, it is clear that the total of the monies used to buy the vehicles, house and shares exceeds the pastors employment income. In practice, therefore there is the need for NGOs to ensure the office of the Minister for Finance is also involved in the process of negotiating contracts with the other relevant Ministry, so that the exemptions concluded can be gazetted. 10% ceiling of the Gross Total Income applies, Government or any NGO approved local authority , institution or association used for the promotion of family planning, 10% ceiling of the Gross Total Income does not apply. Taxes in Ghana at a glance, but obsolete. Any additional day is Gh, Income tax After each quarter (March, June, September, December), you pay Gh, Annual financial statements After the last working day of April, you will pay Gh, Copies of payment receipts for general and operational expenses, Custom import documents as evidence for importation, VAT invoices must agree with the Monthly VAT filings, Monthly VAT filings must agree with the reported Annual turnover figure in the financial statement. As well as paying tax in Namibia, you might also still be eligible to pay some . The country director shared that working in an NGO comes with a lot of accountability and audits. He added that NGOs also pay taxes and are checked by the Ghana Revenue Authority (GRA). The Ministry of Finance and Economic Planning is responsible for overseeing the GRA. Penalty for late filing of tax returns are. Well, essentially there is a two step process in terms of (i) recognition as a charitable organisation and (ii) minimum annual expenditure on the organisations activities. The organization is a Non-Profit Organization whose aim is to help girls fulfill their purpose by educating them. iii. If the business concerned is one that falls within the purview of the educational business carried out by an educational institution of a public character, then the income from that business will qualify for exemption from tax.. All businesses are required to register with the Ghana Revenue Authority (GRA). Hence, you should know the various taxes to pay and the rates. RUPFA was registered on 27th July 2015 with the number CG172072015 of Registrar General of Ghana under Companies Codes, 1963(Act 179). Income Tax Exemptions are the amounts that are reduced or removed from Income amounts because they are exempt from taxation. And in the advanced economies they are called Charities. In particular, whilst for an individual there is no filing obligation if there is no taxable income, for an entity (i.e. Further the profits earned by any charitable trust from a construction project cannot be subjected to exemption u/s.11 but be entitled to deduction u/s.80IB(10). It is, therefore, important for us as a country to know the position of the law and chart a way forward in creating an all-inclusive society that promotes fairness in honouring our tax obligations. There is no reason to believe that the individuals who did not have taxes deducted at source are inherently non-tax complaint. STEP 3 Complete Company limited by guarantee form 3B. Can an NGO be converted into a Company Limited by Shares? The intention of the tax law is to tax the business income of a charitable organisation. Privacy Policy Under Act 896, there are 3 key conditions that must be satisfied by a religious organisation to qualify for exemption from income tax. Therefore, the applicable withholding tax rate is 3%. The following are important to take note of, one of legal frameworks governing the NGO sector is the Income Tax Act 1997. b. For domestic transactions, examples include, works (5%); goods (3%); services (7.5%); etc. However, if an NGO working for women empowerment earns profit by selling off the handicrafts made by the women employed by them shall not be made taxable. It is based in Accra Ghana. So why the fuss about taxation of NGOs? Articles of incorporation from the country of origin (if it is an external company). These originate either from the foreign offices of the developed countries or from the multilateral organizations set up by different countries such as the United Nations, the World Bank, the Asian Development Bank. In 2017, the annual income generated by a church from. According to him, the impression that heads and employees of NGOs are rich, mostly because of their cars and outlook, is what is influencing the idea that they profit off their work. Uganda's Income Tax Act provides that an organization is exempt from paying income tax if it falls within the definition of "exempt organization" under Section 2 (bb) of the Income Tax Act and has been issued a formal . 35AC of the Act if an NGO gets registered the central government approves of the scientific research programs/projects to be carried out by such organization. Youth World Travel Organization (YWTO) is situated in Ghana. The activities of the entity should not directly or indirectly be to the private benefit of the owner(s) or associates of the owner(s). The religious organisation must also apply to the CG for the grant of the status of being a religious organisation as a way of serving as check and balances to curtail abuse of the tax exemption process. And, any corresponding expenditure must relate to the purpose for which it was set up and approved by the CG. Many of these either are self-employed, are in occupations that lend themselves to significant cash payments, or have other forms of income not subject to payroll withholding. The least tax compliant were those who worked in occupations that involved service delivery, sales, transport and construction tradesmen. Salary, allowances, facilities, pension and gratuity of the President; Income directly connected to the Government or local authorities activities; Income of a non-commercial public corporation; Gain from life insurance when the proceeds are paid by a resident insurer; The income of a non-resident person from a business that operates ships or aircraft, if the Commissioner-General is satisfied that an equivalent exemption is granted by that persons country of residence to persons resident in Ghana; A dividend paid to a resident company by another resident company when the company receiving the dividend controls at least 25% of the voting power in the company paying the dividend. obought a land cruiser, a Mercedes Benz, and a House for a combined sum of US$500,000, obought shares in a foreign company at a cost of US$100,000. No. The district office (A.M.A) after inspection and evaluation write a report to the national or regional office by submitting 3 copies of an endorsement letter of the department of social welfare. The renovation is considered as works. Salaries, wages, overtime, leave pay, bonus, and similar employment income. NGOs play a pivotal role in our society. The law streamlined the definition of religious organisation by going beyond the limited scope provided under S.M.C.D 5 to include religious organisations other than churches. Nice Article. This exemption does not apply to certain special industries; Interest or dividend on an investment paid or credited to a holder or member of an approved unit trust scheme or mutual fund; Interest and gains realised by a non-resident person on bonds issued by the government of Ghana; Gains from the realisation of GSE- listed securities; Income of an approved unit trust or mutual fund; and. The intention of the law to tax the business income of charitable organisation gives rise to two key issues that needs addressing. Incidentally, even if there is no taxable income this does not negate the requirement to file an income tax return. Some NGOs are local while others are International NGOs. Helping Street Children And Empower Local Womem. Similarly, Act 179, requires all Companies and Trusts to file their annual accounts (returns) with the Registrar of Companies. Employees of . Some tax laws are complex, not easily understood. NGOs are also exempt from customs duties under the EAC-CMA which is the law that regulates customs in all the EAC partner . The Company is working in Secretarial Services, Associations business activities. Kasoa, Down-Town, KD 195/9, Accra, Ghana View map. If you are an established business operating in Ghana, one of your key obligations is to pay your taxes. For foreigners who do not reside in Ghana but . ii. Derived from property held under trust for a charitable purpose, which tends to promote international welfare in which India is interested, To the extent income is applied to such charitable or religious purposes outside India.Exemption is available only if the Board has directed such exemption, Income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. What are non governmental organizations in Ghana? i. The net amount due to the supplier is US$4,750. Where the Commissioner has established that the company or NGO is exempt, then the NGO is exempted from paying corporate taxes. It maintained the tax exemption status for religious organisations under Section 3(1)(d) of the law. The survey sought to find out from the respondents about their profession, where they work, for whom they work, and whether taxes were deducted from their pay in the course of the survey period. Who or that has been issued with a written ruling by the CG currently in force stating that it is an exempt organisation; and, c.None of whose income or assets confer, or may confer, a private benefit, other than in pursuit of the organisations functions. To this end, the following sectors deserve the attention of the Internal Revenue Service (IRS): manufacturing (small and medium size firms), the hospitality enterprises, construction and transportation sectors, and professional service providers. Governing Board, Click on the representative below to chat on WhatsApp or send us an email to info@gra.gov.gh, Copyright 2022, All Right Reserved, Ghana Revenue Authority. Some NGOs in Ghana generally work through volunteers and they are funded through free-will donations from people. In 1961 (fourteen years later), the Income Tax Ordinance introduced the concept of exemption from payment of income taxes by ecclesiastical or charitable organisations, Christian Council of Churches, the Muslim Council, et al. Providential Aid Organization is situated in Kumasi, Ghana. Such pernicious inequities in the tax burden have in the past contributed to smuggling in no small measure of exports. But NGOs said the UK, whose overseas territories amount to a third of the world's tax havens, is in a unique position to do much more. Other donations to the church amounted to US$800,000. Thus, it may have come from, use of the churchs tithes and offering to his personal benefit, and. PAYE is computed with the personal income tax rates. (It must be proved and signed by directors of the company at the Annual General Meeting of the company). operation of commercial transport. However, NGOs make efforts to pay fair wages to their workers. 10, Plot 48, Osu Badu Road/Broadway, Accra, Ghana. 501 (c) (3) charitable nonprofit organizations typically are exempt from paying income and property taxes and donations to their work are deductible on federal and most state tax returns. Yet a wrong had been done her which needed righting. The official fee for registering a company limited by guarantee with the Department of Social Welfare is 1,200 for local NGOs and $1,200 for foreign NGOs who have their branches registered in Ghana. I say so because, how many of our religious organisations file their annual returns with the Registrar of Companies? 21ST CENTURY INITIATIVES A local NGO which uses Drama as its mode of Education a non for profit for poverty reduction,health and education assistance for Ghanaian communities. The pastor also travelled to the United Kingdom to preach in one of the branches of the church and received a gift equivalent to a value of US$50,000. The person or organization will get a deduction of 50% of donation amount from the Taxable Income. This organization is a registered Non Governmental organization. In addition to all these, what has been made taxable are the kind of anonymous donations made by any organization or institutions or individual to a charitable organization at a rate of 30%. An NGO doesn't have to pay tax just by . Annual income tax rates (Effective January 2022) Find below, Monthly income tax rates (Effective January 2022) Find below. However, the interest or dividend accrued on such fund can also be utilized. In Chapel Hill School Limited v the Attorney-General and the Commissioner, Internal Revenue Service, [2009, Unreported] Dr. Date-Bah JSC (as he then was), said Our comment on this argument by the Second Respondent (Commissioner, Internal Revenue Service) would be that the mere fact that what the Appellant does constitutes a business does not inevitably lead to the conclusion that the activity cannot be exempt from tax. In many countries, NGOs are exempt from paying state and federal taxes. This appears not to be the case now. The annual employment income of the pastor of US$100,000 [8,333.33*12months] is subject to employment income tax (PAYE) using the graduated scale. Includes transportation by bus and similar vehicles, train, boat and air. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. 2 Only certain types of nonprofit organisations are exempt from income tax. The survey appears to suggest that the scope of personal taxation within the formal private sector may be greater than seems to be commonly recognized. 35AC of the Act. Categorizados em: Sem categoria Este artigo foi escrito por The School is not into the business of rental of commercial premises. The Money Laundering Act, 2002 is applicable to the anonymous donations, irrespective of made to a charitable or religious institution. Finally, the urgency of the exercise drives home the need to increase domestic revenue mobilization in order to be less dependent on external resources for development. A large segment of those engaged in service delivery and construction, and in distributive trade and commerce, were noted as the least likely groups to have taxes deducted from their earnings at source. c.Provision of services such as training, or consultancy. NGO (A non-governmental organization) is an association normally citizen-based that independently carries out its functions without government interference usually to serve some social or political purpose. Donation to religious organisations creates a 360 degree benefit for individuals. The predefined criteria include being a resident entity of public character that is established for relief of poverty or distress of the public, advancement of education, or provision of general public health, education, water or road construction or maintenance. Medical services, essential drugs as listed under Chapter 30 of the HS Code produced or supplied in Ghana, specified active ingredients for essential drugs, and selected imported special drugs determined by the Minister for Health and approved by Parliament. Firstly, in terms of common law for a person to be seen as carrying on a business, it is generally understood that there must be a profit motive - and indeed, this approach was also previously reflected in the income tax legislation, which prior to July 2017 explicitly defined the term business to exclude activities that are conducted without a profit motive. It is the employers responsibility to file monthly tax returns on behalf of its employees. An entity of public character is required to have its membership open to the general public or an identifiable group of persons, to operate without profit motive, not to distribute profits generated from its charitable business and to have its profits ploughed back and used solely for the original charitable function. Therefore it cant be implied from the nature of a charitable or voluntary or religious organization or any such organization that carries out social or economic or developmental programs to reach to those people where even the government cannot reach. STEP 4- Company limited by guarantee regulations form. So, in a word do remember to file the returns even if no tax is payable! Tax benefits. The supply of educational services at any level by an educational establishment approved by the Minister for Education. "However, before you are exempted from paying certain taxes, the individual must go to GRA with a. Be that as it may, the following are clear. Condition of Use If an NGO, a Section 8 organisation, or a charitable trust wishes for their donations to be excluded from income tax liability, they can apply for registration under Section 12 A. they have been specified in the law, or in any other case, the procedure to enforce such exemption has been followed). In Ghana, tax is deducted from an employees personal income at source through a pay-as-you-earn scheme. iv. Therefore, to the extent that the activities of a religious organisation is required to be of public character as per Act 896, where lies in the taxation of business income of a Company Limited by Guarantee? It specifically exempted religious bodies Catholic, Anglican, and Presbyterian Churches from paying duties on imported items. Taxation is, by and large, the most important source of government revenue in nearly all countries. a. This article is written by Amrita Basu, a student of New Law College, Bharati Vidyapeeth (Deemed) University, Pune. Federal and state tax laws and policies govern many of the operations of charitable nonprofits. Sympathy International is owned and managed by a Ghanaian-owned Non- Governmental Organization (N.G.O). Terminal clerk cross-checks and confirms that the correct fees have been paid. The purpose of the law with regards to the activities of religious organisations is to, among others, specifically empower the CG to approve an entity as a religious organisation, revoke the approval for a good cause or in contravention of the requirement of the law. Importer or agent pays fees and obtains a vehicle toll pass and a waybill from Ghana Ports and Harbors Authority (GPHA). A registration under section 80G of the Income Tax Act, on the other hand, gives tax benefits (80G deduction) to an NGO's donor. The withheld tax must be paid to the Ghana Revenue Authority within 15 days following the month to which the payment relates. Some NGOs in Ghana generally work through volunteers and they are funded through free-will donations from people. By necessary implication, the route for undertaking religious organisations in Ghana may be by a Company Limited by Guarantee under the Companies Act, 1963, Act 179, or by a Trust registered under Trustees (Incorporation) Act, 1962, Act 106 with no particular individual(s) being ultimate beneficiary(ies). Ordinary meaning can, therefore, be given to the stream of income attributable to religious organisations that are exempt from tax. This is the law on taxation of income currently in force. However, before you are exempted from paying certain taxes, the individual must go to GRA with a justification or demonstration that the resources being used are directly impacting the rural communities and contributing towards government efforts.. If you enter only ghana.gov in your browser, you won't find the website. In Ghana, tax is deducted from an employee's personal income at source through a 'pay-as-you-earn' scheme. Section 5(1) of Act 896 provides that the income of a person from a business for a year of assessment is the gains and profits of that person from the business for the year or part of the year. Income derived by religious organisation from engagement in business activities may include: i.sale of anointing oil, water, and similar goods, ii. Careers Article 41(j) of the Constitution, 1992 requires every citizen of Ghana to declare his income honestly to the appropriate and lawful agencies and to satisfy all tax obligations.
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